News: Iran Economy

Iran’s Oil Situation Shows No Signs of Improving

Published on 10 July 2018.

By Staff Writer

In May, US President announced that the United States would be pulling out of the Iran nuclear deal. He also announced that sanctions would be re-applied and new ones would be issued. He is making sure that all those that continue to do business with Iran are affected. And his administration also announced that no waivers would be issued, resulting in numerous global companies pulling out of deals that had been agreed since the JCPOA was implemented.

The U.S. administration is also trying to shut down Iran’s oil exports to zero.

Iranian regime, as expected, is trying to hit back at the United States and officials in the country have said that it will block the Strait of Hormuz.

The price of oil spiked at the end of last month when it was announced by the US State Department that it is expecting countries to cut their imports of Iranian oil to “zero”. This fuelled a rally in oil prices because the market had to balance expected losses from Iran. The general consensus increased the loss to 1 million barrels per day, or 2.5 million barrels per day at worst.

The Trump administration felt the pressure from this and toned-down on its rhetoric, saying that the US would deal with each country separately.

However, its policy on Iran has not shifted and if there are any waivers, they will be few and far between.

It has been reported that South Korea will zero its oil imports from Iran by August. Japan is also feeling the pressure and experts believe that it will cut imports by the November deadline.

Iran’s threat of blocking the Strait of Hormuz is bold, but it is also very unlikely to happen. Yes, it is true that more than a third of all seaborne oil exports (approximately 17 million barrels per day) pass through the Strait of Hormuz and blocking it off would result in a massive rise in oil prices. Into triple figures, estimate experts in the field.

It would not be a surprise if Iran allowed the global oil supply to be so severely impacted as a way of getting back at the United States. After all, the Iranian government would blame Trump. But, blocking the Strait of Hormuz would be a self-defeating move because a large part of Iran’s trade also passes through there. To block off the area would be Iran’s government cutting off its nose to spite its face.

Furthermore, it would provide a response from many, including perhaps the U.S. Navy.

The political pressure in Iran is mounting and it has nowhere to turn. The domestic unrest is reaching new heights as protests continue into the seventh consecutive month. The people are being very outspoken about the Iranian regime’s corruption and mismanagement and they are determined for regime change to happen soon. They know that the government is incapable of reform, despite claims from the West that it is, and they will not give in to the suppressive and violent campaign that the authorities are using to silence the people.